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When Should You Apply for Long-Term Care Insurance?

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Jim Barnash, CFP

Jim Barnash is a Certified Financial Planner with more than four decades of experience. Jim has run his own advisory firm and taught courses on financial planning at DePaul University and William Rainey Harper Community College.

Ask Our Retirement Expert

Have a question? Ask our Retirement expert.

Jim Barnash, CFP

Jim Barnash is a Certified Financial Planner with more than four decades of experience. Jim has run his own advisory firm and taught courses on financial planning at DePaul University and William Rainey Harper Community College.

At some point, older adults may need help completing basic activities like getting dressed and taking baths. Unfortunately, health insurance plans don’t exactly cover this kind of care. This is where long-term care insurance comes into play. If you’re not sure how it works, here’s everything you need to know about the best time to apply for long-term care insurance and why you might need coverage.

What Is Long-Term Care Insurance?

Long-term care insurance refers to coverage for seniors that lasts for an extended period of time. It can be particularly beneficial to adults with a debilitating illness or a chronic health condition. Many types of services fall under the umbrella of long-term care insurance, including adult day care, nursing home stays and care provided by a home aide or an assisted living facility.

If you’re planning to use Medicare to cover the cost of your long-term care, you’ll quickly realize that it won’t provide enough coverage. Under Medicare, you’ll have access to some home health services, short-term nursing home stays, temporary long-term hospital care and hospice care for six months.

But Medicare won’t cover the cost of personal care or help with completing activities of daily living. That’s why you might need to apply for long-term care insurance.

Should You Apply for Long-Term Care Insurance?

This can be a difficult question for adults to answer. Predicting whether you’ll contract a disease or become disabled when you grow older can be nearly impossible, even if you know you’re genetically predisposed to develop a certain medical condition.

Part of the problem with long-term care insurance is the fact that it’s usually expensive. After all, senior care isn’t cheap. The median annual cost for homemaker services was $45,760 in 2016, according to Genworth Financial. A private room in a nursing home costs $92,378, on average. Average long-term care insurance premiums cost thousands of dollars.

Medicaid is one alternative to long-term care insurance. But it’s only available to low-income individuals. Does that mean you’re stuck buying a long-term care policy?

Research indicates that most people don’t need to apply for long-term care insurance. While many seniors will need access to some form of extended care, some studies suggest that these services are often only necessary for a short period of time. A recent report from the Center for Retirement Research at Boston College said that only 20% to 30% of singles needed to invest in long-term care insurance.

If you can afford to pay for long-term care insurance premiums, it may be worth purchasing. A general rule of thumb says that you shouldn’t apply for long-term care insurance unless you have at least $200,000 in assets.

When to Apply for Long-Term Care Insurance

If you’ve decided that you want long-term care insurance, it’s best to enroll in a policy sooner rather than later. According to the American Association for Long-Term Care Insurance, the best time to apply for long-term care insurance is in your mid-50s. Its website states that insurance rates tend to rise 2% to 4% each year for adults in their 50s and 6% to 8% each year for adults in their 60s.

Insurers take many different details into account when deciding whether to offer someone insurance coverage. If you’re an older adult and your health isn’t great, you could be denied a policy. If you are eligible for coverage, you could get stuck with high insurance premiums.

Your best bet is to buy long-term insurance coverage while you’re still relatively young and healthy. That way, you’ll qualify for premiums that are more affordable.

How to Enroll in a Long-Term Care Insurance Plan

Before applying for long-term care insurance, it’s important to compare policies and rates. You’ll also need to figure out how much insurance you need. Some companies that offer long-term care insurance include Northwestern Mutual, Genworth Financial and Transamerica.

You can call and ask for a quote. Then you can speak with an insurance agent who can help you find a long-term care insurance product that meets your needs. Once you’ve purchased a policy, you usually can’t access your benefits until you’re unable to complete two or more activities of daily living (such as dressing, eating, bathing and walking).

Bottom Line

Deciding whether to buy long-term care insurance can be difficult. You may have to pay a hefty premium for services such as home health assistance and custodial care. If you realize that you want to purchase a policy, experts say you’re better off buying one when you’re younger and your insurance premiums don’t cost as much.

Amanda Dixon Amanda Dixon is a personal finance writer and editor with an expertise in taxes and banking. She studied journalism and sociology at the University of Georgia. Her work has been featured in Business Insider, AOL, Bankrate, The Huffington Post, Fox Business News, Mashable and CBS News. Born and raised in metro Atlanta, Amanda currently lives in Brooklyn.

Ask Our Retirement Expert

Have a question? Ask our Retirement expert.

Jim Barnash, CFP

Jim Barnash is a Certified Financial Planner with more than four decades of experience. Jim has run his own advisory firm and taught courses on financial planning at DePaul University and William Rainey Harper Community College.